Bureau of Local Government Finance Opinion

September 14, 2004 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred thru the City Assessor, to the City Treasurer, both of Iligan City. This refers to the letter dated March 10, 2004 of the City Treasurer requesting opinion relative to the appeal of the National Power Corporation (NPC) for reduced payment of real property tax of the diesel run electric power plants of the Northern Mindanao Power Corporation (NMPC) located in said city. Representation is being made that the power plants were put up in 1992 under the Build Operate Transfer (BOT) Law created under R.A. 6957. The subject BOT stipulates, among others that the NPC was required to be responsible for the payment of real property taxes of NMPC. NPC, however, contends that all lands, buildings and other improvements of NMPC should be assessed only at ten (10%) percent and the machineries and equipment must be declared exempt from real property tax. That office, however, submitted that the said request cannot be granted for reason that NMPC is a private corporation and therefore Sections 216 and 218 of the Local Government Code of 1991 (R.A. No. 7160), are inapplicable. In this regard, enclosed is a copy of the 5th Indorsement dated October 7, 1996 of this Bureau, the dispositive portion of which are reproduced hereunder for your ready reference: "xxx xxx xxx "However, Section 216 of the said Code is equally clear that "lands, buildings and other improvements thereon . . . owned and used by . . . government-owned or controlled corporations rendering essential public services in the . . . generation and transmission of power shall be considered as special ." Succinctly, the conditions that must concur in properly classifying these real properties as "special class" are (1) the ownership (the owner should be a GOCC rendering public services); and (2) the use thereof, meaning that said real properties should be actually, directly and exclusively utilized in the generation and transmission of electric power . (Emphasis ours) "Considering, therefore, that the subject parcel of land is still titled in the name of Maria Quesada, the same may not be classified as 'special class' although actually, directly and exclusively used by NPC in the generation and transmission of electric power. Under the circumstances, said property falls under the classification of "industrial land" and, therefore, the assessment level to be applied should be that which was fixed by ordinance of the sanggunian panlalawigan of that province for "industrial lands." Accordingly and applying the abovequoted opinion of this Bureau, the land, buildings and other improvements used by NMPC although actually, directly and exclusively used in the generation and transmission of electric power, are subject to real property tax at an assessment level fixed by the local Sanggunian thereat for "industrial lands." EADCHS Be guided accordingly. (SGD.) ERLITO R. PARDO In-Charge of Office (Deputy Executive Director)